Measuring Spillovers Between UK Public, Charity and Private Medical Research
Assessing the economic impact of public spending in medical research, as with all areas of public expenditure, has never been more important. One way in which to measure this impact is to measure the effect on pharmaceutical industry research and development (R&D) activity in the UK.
The public, private and charity sectors all play large and complementary roles in medical research in the UK. Realising the benefits of publicly funded and charity-funded medical research, such as preventing or treating illness, advancing scientific knowledge and generating economic wealth, often involves private industry. The private sector may build upon public and charity-funded research by undertaking its own further research, and developing and commercialising medicines and other products for use in health care.
In the first UK study of its kind, the King’s Policy Institute, the Office of Health Economics and RAND Europe have worked together to develop a methodology for estimating how many pounds of pharmaceutical industry R&D is stimulated in the UK by each additional £1 of government- or charity-funded expenditure on medical research.
- Public (meaning government and charity) research investments ‘crowd in’ additional private sector R&D investments: in the UK every additional £1 of public medical research expenditure is associated with an additional £0.83–£1.07 of private pharmaceutical industry R&D spend
- 44 % of that additional private sector expenditure occurs within 1 year
- This spillover effect implies, when combined with other evidence in the economic literature, a real annual rate of return (RoR) to public biomedical and health research in the UK of 15–18 %.
- When combined with previous estimates of the health gain that results from public medical research in cancer and cardiovascular disease, the total RoR in the UK would be around 24–28 %.
King's College London
Office of Health Economics, London
Michele Pistollato (formerly)
University of York